toucanBox's marketing

The strategies big subscription box startups used when they launched

Consumer demand for curation has created a big opportunity. Startups are thinking about how products can be delivered, and benefiting from recurring revenue and a captive audience.

Did you know you can subscribe to get hand-picked craft beers delivered to your house every month? What about shaving equipment, coffee or film memorabilia?

We spoke to the experts that created the original marketing strategies of Loot Crate, HelloFresh and toucanBox about how they got started.

Marketing a subscription box startup

The idea of sending locally sourced ingredients to subscribers’ doors every week is relatively new. That creates a challenge that a lot of subscription products face; you don’t just have to make sales, you have to explain what you’re selling.

This often means starting with innovators – consumers willing to take risks and try a new service – and working hard to build a following.

“You start with friends and family, and you try and build on that base,” said Freddy Ward, who was HelloFresh‘s first marketing hire and now runs Wilddeo. “The first job we had to do was build the category, not the brand. We spent a lot of time at food events and festivals talking to people face to face about the product.”

Startups need to think about creating a strong reason to purchase, which often involves a discount or offer, and need to be incredibly protective about the marketing budget they have, suggests Ward.

“Don’t spend on anything that you can’t be confident you can’t scale at an acceptable marketing return,” he warns. “Some people get really excited and buy tube or TV campaigns, particularly when they get their first bit of investment. We were incredibly disciplined in knowing how much money we put in and what we would get out. And then you really scale and build that up.”

Building partnerships to help with marketing

It’s common to leverage partnerships to reach your audience. In some cases, businesses will promote other subscription products to their customers through inserts.

Depesh Mandalia is founder of Facebook advertising agency SM Commerce and helped scale kids subscription service toucanBox as CMO. He suggests partnerships as a low cost, high-volume acquisition channel.

“Avoid diving straight into paid search, social and other paid activity unless you have in-house expertise,” he recommends.

The role of content in building a brand

Building a narrative around your product and the problem it solves helps develop market awareness. Think about what makes it unique – how does it improve the lives of your subscribers?

HelloFresh put a big emphasis on content as the business evolved from early adopters who make impulse purchases to more mainstream users who take a considered approach.

“What we realised and worked hard to do is create a journey where we don’t expect customers to buy on the first time of seeing our brand,” explains Ward. “We look to build a relationship through capturing their email address or their cookies and then slowly feeding them content to explain the product.”

The nurturing approach means customers really understand what they are getting, boosting satisfaction and customer lifetime value (the total amount the business will earn from the average customer).

Loot Crate offers a subscription to “Comic-Con in a Box”, as its founder puts it, including things like Matrix puzzles and RoboCop T-shirts. Matthew Arevalo’s built the business to an incredible 650,000 subscribers and says community content played a big role in that.

“Early on, we discovered that fandom is something that should be shared, regardless of the medium, and that people wanted a way to share their unboxings,” Arevalo explains.

Fans post videos of them opening their Loot Crate box, some of which have thousands of views. The business eganges with “Looters” directly, promoting their videos and giving some unique referral links and custom landing pages.

The importance of customer retention and lifetime value

It’s common for subscription box startups to spend money on advertising and offer the first box free. This means it’s crucial to keep users engaged.

“Two often overlooked aspects of increasing retention are: increasing your understanding of your consumer and where the product fits into their life, and reinforcing the value of what you are offering,” says Mandalia.

The example he uses to make this point is a coffee subscription business targeting busy 25-35 year-old high flyers. Knowing that their prime drinking time is right before they leave in the morning identifies a communication path; talk about how quick and efficient your product is and cross-sell them a branded travel coffee cup.

Pact Coffee includes a welcome booklet, sends emails and SMS messages, and even makes a courtesy call. HelloFresh has a series of touch points to increase engagement like a monthly magazine and a rewards programme.

It’s an exciting time for subscription box businesses. Consumers care about provenance more than ever and are getting more used to paying by subscription, whether it’s for Netflix or Beer52.

For those that have been able to scale, the key has been making sure your audience is well defined and that marketing can target and convert them in a cost-effective manner. It’s also important that you continue to build engagement throughout customers’ lifetimes.

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ChrisGoodfellow

ChrisGoodfellow

Chris is founder and CEO of Box 2 Media, the company that runs The Pitch. He's a journalist and editor by trade, and his work has been featured by everyone from The Guardian and The Financial Times to Vice magazine.

2 comments

  • Interesting piece!

    You’re spot on with emphasising the value of curation, and with the importance of building engagement fast (that’s vital whatever the on ramp, not just if the first delivery is free).

    There are a couple of other areas you might consider for following up.

    First, subscription as an OTT (Over the top of conventional distribution)/D2C (Direct to consumer) play for emergent brands, especially in food and beverage. It’s easier than ever today to get started with your own products or curated collections, but we’re still seeing (certainly in the UK) that emergent brands haven’t joined the dots: they invest heavily in social media but all too often fail to use that same effort to build their company with the MRR (monthly recurring revenue) that adds credibility opposite investors and channels, not to say creating the opportunity to bootstrap if that’s your path. There are elephant traps, admittedly, partly because passionate teams are easily led down “safe” paths that are expensive and ineffective. Awesome web shops (Google e-commerce and you’ll see all the usual suspects) generally suck at curated subscriptions, because they’re optimised (duh!) for one time visitors and subscription add-ons tend to be clumsy afterthoughts. Point solutions for recurring billing are awesome if you’re selling web apps and other virtual good but they just don’t tend to be built for premium curated perishables!

    Second, too many promising subscription ideas let poor operational systems shape their consumer offer, which leads to industry “wisdom” about monthly churn that leads founders to aim low and still miss! Venture-backed challenger brands custom build complex software based initially on guesswork and then on the data, and the rest largely build customer experiences that are the opposite of awesome: overwhelming choice (defeating the object of adding value as trusted curator) or “melon of the month club” simplicity that enforces ideal segmentation/persona focus over the state-of-the-art machine learning that optimises efficiency and engagement, increasing LTV (lifetime value), reducing churn, increasing smart engagement opportunities by identifying triggers and signals buried in the data and… well, I could go on, but any one of these is a source of unfair advantage that I’d want!

    Clearly because those are the problems we set out to solve with magicsubscriptions.com, I would say that, wouldn’t I?! But I’d be happy to be put to the test. We’re the secret sauce that’s cheap as chips and even more awesome (Mmmmm… Chips…). If you’d like a taste-test, we’re in!

  • While they don t have an investor pitch deck, they do have a media kit  containing the company’s value proposition, key metrics, and marketing services that were used to sell ads to potential clients.

Thanks to everyone who took part in The Pitch 2019 - we hope you enjoyed it as much as we did.

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